Health Net 2014 Annual Report Download - page 87

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the District of Columbia, Puerto Rico and the Virgin Islands. The PC3 Program contract term includes a base period of
performance through September 30, 2014 and four one-year option periods that may be exercised by VA. On September
23, 2014, the VA exercised option period 1 which commenced on October 1, 2014 and is scheduled to end on
September 30, 2015. In addition to the one-year option periods, VA will have the ability to extend the PC3 Program
contract an additional two years and six months based on VA's need. In August 2014, VA expanded our PC3 Program
contract to include primary care services for veterans who are unable to obtain primary care at a VA medical center in
the three PC3 regions in which we operate. In addition, in November 2014, we modified our PC3 Program contract to
further expand our services with VA in support of the Veterans Access, Choice and Accountability Act of 2014
("VACAA"). The VACAA modification to our PC3 contract expires no later than September 30, 2017. See Note 2 to
our consolidated financial statements under the heading “Government Contracts” for additional information. For the
year ended December 31, 2014, we had $24.7 million in revenues from the PC3 Program.
In addition, we administer contracts with VA to manage community-based outpatient clinics in one state covering
approximately 3,696 enrollees.
Government Contracts Segment Membership
2014 2013 2012
(Membership in thousands)
Membership under T-3 TRICARE contract......................................... 2,837 2,851 2,883
Under the T-3 contract for the TRICARE North Region, we provide administrative services to approximately 2.8
million, 2.9 million and 2.9 million MHS eligible beneficiaries as of December 31, 2014, 2013 and 2012, respectively.
Government Contracts Segment Results
The following table summarizes the operating results for the Government Contracts segment for the last three
fiscal years:
Year Ended December 31,
2014 2013 2012
(Dollars in thousands)
Government contracts revenues........................ $603,975 $572,266 $689,121
Government contracts costs .............................. 534,442 497,780 599,211
Income from continuing operations before
income taxes................................................. 69,533 74,486 89,910
Income tax provision......................................... 28,256 30,900 35,777
Income from continuing operations.................. $41,277 $43,586 $54,133
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Government contracts revenues increased by $31.7 million, or 5.5 percent, for the year ended December 31, 2014
as compared to the same period in 2013. Government contracts costs increased by $36.7 million or 7.4 percent for the
year ended December 31, 2014 as compared to the same period in 2013. The increases in government contracts
revenues and costs for the year ended December 31, 2014 were primarily due to services provided under the PC3
Program and due to growth in our MFLC program.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Government contracts revenues decreased by $116.9 million, or 17.0 percent, for the year ended December 31,
2013 as compared to the same period in 2012. Government contracts costs decreased by $101.4 million or 16.9 percent
for the year ended December 31, 2013 as compared to the same period in 2012. These declines were primarily due to
the terms and structure of the MFLC contract entered into in August 2012, as compared to the prior MFLC contract.